Article titled:
The Henry Ford of Heart Surgery shows how assembely line mass production technqiues can substantially lower healthcare costs in ops even as complex as heart surgeries.
Of course, the process innovations that enabled this miracle to come about - by leveraging massive scale economies - happens yet again in Yindia.
And while the cost declines are nothing to sneeze about, the quality uptick coming in is also compelling indeed. Chew on this a while:
- The typical US cost is $20-100k whereas the very same Op in Banglore costs $2k.
- At the same time, the avg hospital profitability is higher in India than in comparable heart surgery hosps in the states!
- And all this while Quality figs - measured in terms of mortality rates for heart patients a month after surgery is lower in India (at 1.4%) than in the States (at 1.9%).
Munch on that a while and consider the implications.
The entrepreneur doctor who embarked on this brave route has a lot to look forward to in terms of expansion and new mkts. He's setting up a hosp in the Caribbean to service the US mkt from its near abroad. On more in Iceland/Ireland or central Europe to invade the EU mkt should be on the cards. All funded by pvt equity play, by the way.
Anyway, read the article in full. Some choice excerpts:
Dr. Shetty, who entered the limelight in the early 1990s as Mother Teresa's cardiac surgeon, offers cutting-edge medical care in India at a fraction of what it costs elsewhere in the world. His flagship heart hospital charges $2,000, on average, for open-heart surgery, compared with hospitals in the U.S. that are paid between $20,000 and $100,000, depending on the complexity of the surgery.
The approach has transformed health care in India through a simple premise that works in other industries: economies of scale. By driving huge volumes, even of procedures as sophisticated, delicate and dangerous as heart surgery, Dr. Shetty has managed to drive down the cost of health care in his nation of one billion.
His model offers insights for countries worldwide that are struggling with soaring medical costs, including the U.S. as it debates major health-care overhaul.
"Japanese companies reinvented the process of making cars. That's what we're doing in health care," Dr. Shetty says. "What health care needs is process innovation, not product innovation."
At his flagship, 1,000-bed Narayana Hrudayalaya Hospital, surgeons operate at a capacity virtually unheard of in the U.S., where the average hospital has 160 beds, according to the American Hospital Association.
Narayana's 42 cardiac surgeons performed 3,174 cardiac bypass surgeries in 2008, more than double the 1,367 the Cleveland Clinic, a U.S. leader, did in the same year. His surgeons operated on 2,777 pediatric patients, more than double the 1,026 surgeries performed at Children's Hospital Boston.
Next door to Narayana, Dr. Shetty built a 1,400-bed cancer hospital and a 300-bed eye hospital, which share the same laboratories and blood bank as the heart institute. His family-owned business group, Narayana Hrudayalaya Private Ltd., reports a 7.7% profit after taxes, or slightly above the 6.9% average for a U.S. hospital, according to American Hospital Association data.
And...
The group is fueling its expansion plans through private equity, having raised $90 million last year. The money is funding four more "health cities" under construction around India. Over the next five years, Dr. Shetty's company plans to take the number of total hospital beds to 30,000 from about 3,000, which would make it by far the largest private-hospital group in India.
At that volume, he says, he would be able to cut costs significantly more by bypassing medical equipment sellers and buying directly from suppliers.
Then there are the Cayman Islands, where he plans to build and run a 2,000-bed general hospital an hour's plane ride from Miami. Procedures, both elective and necessary, will be priced at least 50% lower than what they cost in the U.S., says Dr. Shetty, who hopes to draw Americans who are uninsured or need surgery their plans don't cover.
By next year, six million Americans are expected to travel to other countries in search of affordable medical care, up from the 750,000 who did so in 2007, according to a report by Deloitte LLP. A handful of U.S. insurance plans now give people the choice to be treated in other countries.
The growth in Americans seeking treatment abroad has skyrocketed and can safely be expected to grow even further. If somebody is going to take advantage of this burgeoning trend, why not a desi do so?
Quality issues tackled:
But Jack Lewin, chief executive of the American College of Cardiology, who visited Dr. Shetty's hospital earlier this year as a guest lecturer, says Dr. Shetty has done just the opposite -- used high volumes to improve quality. For one thing, some studies show quality rises at hospitals that perform more surgeries for the simple reason that doctors are getting more experience. And at Narayana, says Dr. Lewin, the large number of patients allows individual doctors to focus on one or two specific types of cardiac surgeries.
...
Dr. Shetty's success rates appear to be as good as those of many hospitals abroad. Narayana Hrudayalaya reports a 1.4% mortality rate within 30 days of coronary artery bypass graft surgery, one of the most common procedures, compared with an average of 1.9% in the U.S. in 2008, according to data gathered by the Chicago-based Society of Thoracic Surgeons.
It isn't possible truly to compare the mortality rates, says Dr. Shetty, because he doesn't adjust his mortality rate to reflect patients' ages and other illnesses, in what is known as a risk-adjusted mortality rate. India's National Accreditation Board for Hospitals & Healthcare Providers asks hospitals to provide their mortality rates for surgery, without risk adjustment.
Dr. Lewin believes Dr. Shetty's success rates would look even better if he adjusted for risk, because his patients often lack access to even basic health care and suffer from more advanced cardiac disease when they finally come in for surgery.
On the bottom-of-the-pyramid opprtunity in India and how the high value consumer subsidizing the low income ones all leveraged using scale is an excellent example of "it happens only in Yindia". TN based Arvind Eye Hospital also famously follows the same model.
Would be great is some Northern states like HP or Uttaranchal get their act together and offer these kind of hospitals land on favorable terms. Such health cities should be there in all 4 zones of the country, at least. Right now they are pursuing manufacturing units giving tax breaks and concessional land rates without much success.
On returning to India in 1989, Dr. Shetty performed the first neonatal heart surgery in the country on a 9-day-old baby. He also confronted the reality that almost none of the patients who came to him could pay the $2,400 cost of open-heart surgery.
"When I told patients the cost, they would disappear. They literally didn't even ask about lowering the price," he says.
...
Four years ago, Dr. Shetty scrutinized his annual bill for sutures -- then $100,000 and rising by about 5% each year. He made the switch to cheaper sutures by Centennial, cutting his expenditures in half to $50,000.
"In health care you can't do one big thing and reduce the price," Dr. Shetty says. "We have to do 1,000 small things."
He says he would also like to find lower-cost versions of his priciest medical equipment. But the Chinese makers that have brought good quality, cheaper machines to market don't yet have enough local service centers to ensure regular maintenance.
And its not as if surgeons here are paid poorly at all.
Cardiac surgeons at Dr. Shetty's hospitals are paid the going rate in India, between $110,000 and $240,000 annually, depending on experience, says Viren Shetty, a director of the hospital group and one of Dr. Shetty's sons.
Dr. Shetty was paid almost $500,000 last year, according to the group's audited financial statements.
Here, too, Dr. Shetty finds additional savings on the per-patient cost. His surgeons perform two or three procedures a day, six days a week. They typically work 60 to 70 hours a week, they say. Residents work the same number of hours.
In comparison, surgeons in the U.S. typically perform one or two surgeries a day, five days a week, operating fewer than 60 hours.
Dr. Shetty says doctor fatigue isn't an issue at his hospital, and in general, his surgeons take breaks after three or four hours in surgery.
Anyway, read it all. The lower-end of the market is a HUGE opprtunity. And addressing it will drive India's innovative edge. The solutions required will have to be Yindian and not imported. The localized market gyan and mkt access will also have to be India-heavy.
Read it all before I end up copy-pasting the entire article.
Sudhir
